Key Takeaways:
- Economic growth in both Canada and the United States is expected to continue in 2026, though volatility is likely to increase.
- Trade uncertainty, including the upcoming review of the USMCA agreement, remains a key risk for the Canadian economy.
- Artificial intelligence adoption is still in early stages but is expected to drive productivity and earnings growth over the coming quarters.
- U.S. economic resilience could be supported by tax cuts, deregulation, and easing monetary policy, despite slower growth than recent years.
- Mortgage renewals and housing affordability pose potential headwinds for Canada’s financial sector in 2026.
Introduction to the 2026 Market Outlook
Michael Dehal, senior portfolio manager at Dehal Investment Partners, Raymond James Ltd., joins BNN Bloomberg to discuss his predictions for the markets in 2026. Canada and the United States are expected to see continued economic growth, though trade uncertainty, housing pressures, and geopolitical risks could contribute to higher volatility. Dehal shares his insights on the outlook for North American economies, the role of artificial intelligence, and the risks facing trade, housing, and financial markets in the year ahead.
Canadian Economy and Trade Uncertainty
Dehal believes that the Carney government’s policies could provide tailwinds to the Canadian economy, particularly in areas such as industrials and financial sectors. He expects the government to increase spending on infrastructure and construction, as well as strengthen trade partnerships outside of the U.S. However, Dehal notes that the U.S.-Canadian trade relationship remains a significant headwind, with the upcoming review of the USMCA agreement in August 2026 potentially causing volatility. Additionally, the job market and housing market are areas of concern, with fragility in the job market and potential headwinds from mortgage renewals and housing affordability.
U.S. Economy and Resilience
Dehal is optimistic about the U.S. economy, citing its resilience in 2025 despite expectations of a downturn. He attributes this to the U.S. consumer’s ability to adapt and the implementation of tax cuts, deregulation, and easing monetary policy by the Trump administration. Dehal expects the U.S. economy to continue growing in 2026, albeit at a slower pace than in recent years. He also highlights the potential benefits of artificial intelligence adoption, which is still in its early stages but expected to drive productivity and earnings growth over the coming quarters.
Artificial Intelligence and Productivity
Dehal notes that companies are starting to incorporate artificial intelligence into their operations, with many CEOs and CFOs discussing its potential to improve margins and gross margins. While still in the early days of AI adoption, Dehal believes that its benefits will become more apparent over the next several quarters as more companies adopt the technology. This, in turn, is expected to drive earnings growth and improve stock prices.
Housing Market and Mortgage Renewals
The housing market is a significant concern for Canada, with a large number of mortgages renewing in 2026. Dehal notes that banks have increased their provisions for potential loan losses, indicating that they are preparing for potential difficulties in mortgage renewals. This, combined with housing affordability issues, poses a potential headwind for Canada’s financial sector in 2026.
Conclusion and Outlook
In conclusion, Dehal’s predictions for the 2026 market outlook highlight the potential for continued economic growth in both Canada and the United States, despite trade uncertainty and housing market concerns. The adoption of artificial intelligence is expected to drive productivity and earnings growth, while the U.S. economy’s resilience is likely to be supported by tax cuts, deregulation, and easing monetary policy. As the year ahead unfolds, it will be essential to monitor these factors and their impact on the markets.